Permanent Extension of EAP Employer Student Loan Repayment?

By: Gene Ennis – Core Documents, Inc.

Permanent Extension of Employer Student Loan Repayment Under H.R.1: A Game-Changer for Section 127 Education Assistance Programs if Approved By The Senate

Bradenton, FL May 30, 2025 – In an exciting and long-awaited development, the newly introduced H.R. 1 – One Big Beautiful Bill Act could make sweeping changes to U.S. tax policy if approved by the Senate, including a major shift in how employers can assist their employees with student loan debt. Among the standout provisions in the bill is the permanent extension of the exclusion for certain employer payments of student loan repayment under a Section 127 educational assistance program. This provision, specifically found under Section 110113 of the bill, is a game-changer for both employers and employees, offering financial relief to millions of Americans struggling with student loan debt.

As of May 30, 2025, the “Big Beautiful Bill,” officially known as the One Big Beautiful Bill Act (H.R. 1), has passed the U.S. House of Representatives but has not yet been approved by the Senate.

What Does Section 110113 of the One Big Beautiful Bill Do?

Section 110113 of the new H.R.1 bill aims to provide a long-term, permanent solution to an issue that has gained significant attention in recent years: the burden of student loan repayment debt. Prior to the enactment of this provision, employers could help pay down their employees’ student loan debt through educational assistance programs, but these payments were only temporarily excluded from taxable income. This tax benefit, which was originally set to expire at the end of 2025, is now extended indefinitely, giving employees more certainty and helping employers provide even more valuable benefits to their workforce.

Under this provision, employers can contribute up to $5,250 per year toward an employee’s student loan repayment. What makes this provision especially appealing is that the contributions are exempt from federal income tax for the employee, meaning they don’t have to pay taxes on the amount received as long as the contribution falls within the limit.

In addition, the contribution is not subject to payroll taxes (such as Social Security or Medicare), further reducing the financial burden on both employers and employees. This makes it an incredibly attractive offering for employers looking to stand out in the competitive job market and support their employees’ financial well-being.

The Impact of the Permanent Extension

The decision to make this provision permanent marks a significant shift in U.S. tax policy, providing a stable and reliable tool for employers to help employees manage their student loan repayment over the long term. Here’s a closer look at the impact:

Immediate Financial Relief for Employees

For employees, especially those with substantial student loan debt, the permanent extension of this benefit means that monthly loan payments can be reduced without the added worry of tax consequences. Many people face years of financial strain while paying off loans, and even small contributions from employers can make a notable difference in the long run.

This provision will have the most significant impact on younger workers who are burdened with education debt as they enter the workforce, allowing them to put more of their salary toward savings, home-ownership, or other investments rather than student loan repayment.

A Competitive Advantage for Employers

In a post-pandemic economy, employers are constantly looking for ways to attract and retain top talent. Offering student loan repayment benefits has become an increasingly popular perk. In fact, as of 2023, nearly one in three employers had some form of student loan repayment assistance.

With this provision now permanent, employers can confidently integrate it into their benefits packages without worrying about expiration dates or changes to the law. For many businesses, offering this type of assistance will not only help with recruitment but also enhance employee satisfaction and retention. It’s a straightforward and impactful way to support the financial health of employees while also fostering a more loyal workforce.

Tax Advantages for Employers

For employers, the permanent extension also brings tax advantages. Not only can they provide financial assistance to their employees, but the contributions made toward student loan repayment are also tax-deductible as a business expense. This makes it an easy decision for companies, particularly those in industries where employee retention is crucial and competition for skilled workers is fierce.

Employers can integrate this benefit into their broader educational assistance programs, which can also cover things like tuition reimbursement and other learning opportunities, further enhancing their appeal as a top-tier employer.

Inflation Adjustments: Keeping Up with Rising Costs

While the permanent extension is a huge win, there’s another important aspect of this provision: inflation adjustments. The $5,250 limit is not fixed; it will be adjusted annually for inflation. This ensures that the benefit will keep pace with rising costs of living and the increasing burden of student loan debt, which has soared in recent years.

By indexing the contribution limit to inflation, lawmakers are acknowledging the ever-growing student debt crisis and ensuring that this program remains relevant as the cost of education continues to rise. It’s a step in the right direction toward providing a sustainable solution to the mounting crisis that affects millions of Americans.

Why This Matters Now More Than Ever

The student loan repayment crisis in the United States has been a topic of concern for years, and recent surveys show that Americans collectively owe more than $1.7 trillion in student loan debt. For many, paying off loans can feel like an insurmountable obstacle, with the average borrower taking more than 20 years to pay off their loans. With the federal student loan moratorium ending and payments restarting, this provision could not have come at a better time.

Additionally, with student loan forgiveness programs like Public Service Loan Forgiveness (PSLF) facing challenges and political uncertainty, the permanent extension of this benefit offers a different avenue of relief. It provides a predictable, reliable form of assistance that doesn’t require navigating complex government programs.

Looking Ahead

The permanent extension of Section 110113 in the H.R. 1 bill represents a significant victory for employees, employers, and the broader American workforce. By providing a permanent, tax-advantaged solution for employer student loan repayment, it not only helps alleviate the financial burden of student debt but also strengthens the employer-employee relationship by promoting long-term financial stability.

As inflation adjustments ensure the benefit remains relevant, the bill sets a standard for future legislative efforts aimed at tackling the student debt crisis. Whether you’re an employer looking to offer competitive benefits or an employee hoping for a break in the long, hard road of student debt repayment, the passage of this bill signals a brighter financial future for many Americans.

In the end, making student loan repayment assistance permanent offers a practical, sustainable solution in an era where financial security and educational accessibility should go hand in hand.

Section 127 Educational Assistance Plan Document

Core Documents provides employers with everything they need to establish an IRS- and DOL-compliant Section 127 Educational Assistance Program (including Student Loan Relief) plan document in PDF format for as low as $149. This cost reflects a one-time setup fee, not an annual charge.